Blackstone is making big moves.
Just three days after the private equity group sold the remains of its Hilton stake, it’s scooping another hotel giant. Blackstone agreed to buy U.S. hotel owner LaSalle Hotel Properties for $3.7 billion, outbidding a $3.5 billion offer by Pebblebrook Hotel Trust. Pebbelbrook later upped its bid, but LaSalle went with Blackstone, determining that “this transaction represents the most compelling opportunity.”
The deal values LaSalle at $33.50 per share and represents a 5% premium to LaSalle’s closing price on Friday. LaSalle’s Chairman Stuart Scott was reportedly in contact with at least 20 potential bidders and signed confidentiality agreements with 10 of them before agreeing to accept Blackstone’s offer. LaSalle owns four hotels in Manhattan—Gild Hall, Park Central New York, the Roger, and WestHouse.
“After careful consideration of multiple proposals received, the board determined that this transaction represents the most compelling opportunity for LaSalle’s shareholders, delivering a significant premium with immediate and certain cash value,” Scott said in a news release.
If the deal falls apart, the breakup fees are pretty significant. If LaSalle terminates the transaction, the fee amounts to $112 million, whereas if Blackstone decides to back out, it’s $336 million.
The deal makes sense for Blackstone. The private equity firm typically buys hotels and other real estate holdings at a discount and then sells them for a profit after restructuring operations. For instance, the Hilton investment proved fruitful for Blackstone. With the recent exit, Blackstone will realize some $14 billion of profit, meaning that it has more than tripled its initial investment.